WESTERN UNITED STATES:
1 (least attractive) - 10 (most attractive)
- COLORADO: 7:00
- Oregon: 6.71
- Arizona: 6.29
- Nevada: 6.00
- Washington: 5.14
- California: 5.00
Score 1 (least attractive) to 10 (most attractive)
- Regulatory environment: 7
- Current level of saturation: 4
- Size and potential of current market: 7
- State´s willingness to accept new investors: 9
- Legal and political respect of investments: 8
- Possibilities for growth: 3
- Current legal conditions – medical / recreational: 10
Average score: 6.9
Colorado State Snapshot:
- According to a Brightfield Group study conducted in 2015, Colorado has more heavy users of marijuana than nearly any other state; Nearly 42% of cannabis users in Colorado indicated they use the substance daily, versus 34% in Washington and California, and only 26% in more conservative Michigan. This is good news for investors targeting Colorado, as heavy users by and large purchase the greatest amount of cannabis available on the market.
- Colorado’s legal marijuana market witnessed explosive growth in 2014, with sales increasing by nearly 82% thanks to the opening of the recreational market. Naturally, this has created various new opportunities for producers, manufacturers, processors and retailers interested in investing and expanding in the state, while many opportunities still remain for growth and investment in Colorado’s medical marijuana industry as well, particularly as moratoriums and bans in many cities and counties ease.
- The price of marijuana in Colorado is currently quite high but its stability has been called into question, particularly because supply and pricing issues are not new to the state, thus both should be monitored carefully by manufacturers and retailers interested in investing here.
Colorado placed strict new microbial testing rules on the rec industry in October 2015 and growers have reportedly seen up to 70% of the wholesale recreational product in the state knocked out of the market due to producers’ inability to meet these new requirements. This lack of inventory has caused prices to skyrocket, exacerbating price instability concerns. Investors should be wary of current prices, which are expected to steadily fall as cannabis producers begin to meet the new testing requirements.
- Manufacturers looking to enter the state’s cannabis market have ample space in which to do so, particularly in concentrates.
- While various brands, such as Native Roots Extracts (< 5% of medical concentrates brand share) and O.penVape (< 8% of recreational concentrates brand share), have gained a small amount of traction in Colorado – about two-thirds of the medical and recreational concentrates markets are made up of unbranded products or small independent brands.
- Entry into the edibles market is still a possibility, though competition is stiffer, with a handful of dominant brands such as Edipure (with 12.5% of recreational brand shares) and Incredibles (with 19.7% of medical brand shares) leaving between 38 and 48% of the market to the smaller local brands and unbranded products.
- There are relatively low barriers to entry for manufacturers, processors and retailers in Colorado.
- Vertical integration is now optional rather than required in Colorado, and thus production and sales can be done independently rather than all in-house
- License fees are relatively low and virtually anyone can apply for a marijuana business license, as long as they meet certain simple requirements including age, residency, and a clean background check.
- While there is tremendous potential for retailers looking to take advantage of Colorado’s blooming recreational market and more developed medical market, some investors may face challenges getting licensing in certain local jurisdictions. According to the MED 2015 Mid-Year Report from August 2015, nearly 70% of local jurisdictions (222 of 322 total) have prohibited recreational and medical marijuana licensees, barring new recreational #cannabusinesses from opening in these regions.
To date, however, Colorado has licensed hundreds of dispensaries throughout the state. As Colorado's regulatory and enforcement system matures, many of these jurisdictions are expected to begin allowing licenses. This will enable established retailers to expand and new retailers to open in formerly untapped markets.
- The state has had a mature dispensary system in place since 2010, but despite the development of highly sophisticated and professional retail establishments, the vast majority of the state’s 517 medical and 394 recreational outlets are still run by small, independent operations. These independent operations are common in Denver and rural Colorado alike, though they see much more limited competition in rural areas.
This phenomenon may have been due to the limitations placed on licensees by the recently-lifted vertical integration requirement, which did not allow businesses to excel in any specific area (e.g. production, sales). Now that cannabusinesses are free to specialize, larger chains, more powerful brands and stiffer competition will become a new reality in Colorado’s marijuana market.
For the moment, though, investors face few barriers, a welcoming public and a huge, legal marijuana market. Despite its relative maturity in the cannabis industry, Colorado remains an excellent choice for those looking to create or expand cannabusinesses today.
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